Paul Diggle at Capital Economics points out that starts are still in "rollercoaster mode" and this month's decline was largely led by the 26.2% MoM slump in volatile multi-family starts.

"Multi-family starts are typically more volatile for a number of reasons but the main one is quite simple: there are multiple multi-family units in one building, so when a building is started, lots of multi-family units are started," he said in an email to Business Insider. "The 26% m/m decline in multi-family starts isn’t particularly unusual – the mean absolute percent m/m change in multi-family starts since 2000 has been 17%; the max was 81%! (Jan 2011)."

He also pointed out that single-family starts, which account for 70% of all construction activity was almost flat, declining 0.8% on the month.

"Starts are going through a particularly up-and-down period, with the monthly change (whether upwards or downwards) at least 7% m/m in six out of the past seven months," wrote Diggle.

"So the bigger picture is that homebuilding is still very much in recovery mode," he wrote, also pointing to the surge in July's homebuilder confidence number, which is now at a 7.5-year high.

While some look to this as a good leading indicator for starts, Diggle writes that homebuilder sentiment points to a doubling in housing starts by next year which is too optimistic.

"After all the number of building permits, generally a good short-term leading indicator of starts (although they failed to predict June’s slump), also declined last month to 911,000 annualized. And we are still hearing plenty of anecdotal evidence about the constraints on homebuilders from skills shortages, lack of easily developed land, construction costs and access to credit."

But he also thinks many of the constraints are starting to whittle away. Lumber prices have fallen 25% in the last two months, construction employment is improving, and builders seem to be taking rising interest rates into their stride.